Abstract
Though the importance of organizational behavior and human decision processes within firms for the firm performance has largely been recognized in the business and management literature, much less attention has been devoted to studying such implications in the international trade context. This paper develops a general-equilibrium trade model in which heterogeneous workers make an investment decision in acquiring advanced managerial skills and choose their optimal effort level based on their comparative advantage. In doing so, we show how globalization-induced human capital accumulation within firms leads to sustainable economic growth. We also show that workers’ organizational belief and CEO’s managerial vision may be an important element for the human capital formation within firms and for the performance of firms in a global economy.
Highlights
Introduction and Human Capital Investment withWhy some firms engage in international trade while the others focus only on the domestic market, and the impacts of trade liberalization when firms differ, have long been some of the main concerns of trade economists
It is widely documented that exporting firms are more productive than non-exporters and/or that more productive firms self-select into export markets
We develop a general-equilibrium trade model in which heterogeneous employees make an investment decision in acquiring advanced managerial skills and choose their optimal effort level based on their comparative advantage
Summary
Why some firms engage in international trade while the others focus only on the domestic market, and the impacts of trade liberalization (or more broadly, globalization) when firms differ, have long been some of the main concerns of trade economists. Given the externalities between the workers’ strategy-specific ability and the strategy-specific technologies used, as well as the existence of learning costs to obtain each strategy-specific managerial skill, workers endogenously sort into firms and tasks (production vs management) Given this setup, we investigate the impacts of globalization. Workers decide to invest and make efforts based on their own organizational belief, and workers having similar organization belief to the CEO’s managerial vision have higher productivity due to the positive externality In this case, globalization increases the most the productivity and income of the worker who has the same belief as that of CEO in exporting firms, and increases the aggregate welfare of the economy.
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